The entire US economy is currently being propped up by growth in the AI/tech sector. And I am convinced that LLMs are fundamentally incapable of delivering on the promises being made by the AI CEOs. That means there is a massive bubble that will eventually burst, probably taking the whole US economy with it.
Let’s say, for sake of argument, that I am a typical American. I work a job for a wage, but I’m mostly living paycheck to paycheck. I have maybe a little savings, and a retirement account with a little bit in it, but certainly not enough that I can retire anytime in the near future.
To what extent is it possible for someone like me, who doesn’t buy into the AI hype, to insulate themselves from the negative impact of the eventual collapse?
The Japanese stock market crash of 1987 only recovered in 2020. That’s over 30 years.
If that happened in the US, the average american who invested in the stock market and is relying on a 401k to retire would be screwed.
I would say Japan never recovered. The yen is weak, the cost of living is skyrocketing, and Japanese people have said in large-scale national polls that they struggle more to make ends meet than they ever have. Also, the rich are getting richer, and there are far fewer permanent jobs than there were two decades ago.
The main issue in Japan during the 90s was that the government refused to acknowledge the reality of the situation and let the market crash. Instead of allowing bankruptcies and bad loans to clear, they propped up banks and corporations for years - freezing growth and causing decades of deflation and stagnation. The real lesson from Japan isn’t about the crash itself, but about the response: avoiding short-term pain led to long-term paralysis.
If an AI bubble bursts, it would probably resemble the dot-com crash more than Japan’s experience. Central banks act much faster now, bad debt gets cleared out instead of buried, and the global economy isn’t built entirely on AI speculation. So even if valuations take a hard hit, a decades-long depression like Japan’s is very unlikely.